Management Accounting INTRODUCTION 1 MAIN BODY1 Activity 1 1 PART A1 PART B6 Activity 2 8 PART A8 REFERENCES 17 INTRODUCTION Management Accounting INTRODUCTION

Management Accounting INTRODUCTION 1 MAIN BODY1 Activity 1 1 PART A1 PART B6 Activity 2 8 PART A8 PART B12 CONCLUSION 16 REFERENCES 17 INTRODUCTION Management accounting is the process which includes the various practices which help the business to improve their performances in order to achieve business goals & objectives. MAIN BODY Activity 1 PART A Management accounting system: It is also called managerial accounting, where manager handle all the operational activities which help the manager enhance their internal activities. There are various

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Activity 1.........................................................................................................................................1
PART A.......................................................................................................................................1
PART B........................................................................................................................................6
Activity 2.........................................................................................................................................8
PART A.......................................................................................................................................8
PART B......................................................................................................................................12
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management accounting is the process which includes the various practices which help
the business to improve their performances in order to achieve business goals & objectives. With
the help of management accounting, manager analyse the business cost for preparing various
financial reports which further helps in decision making process. It build for the internal purpose
and not regulated by the low (Ajewole, 2016) . Main objective of this accounting is that, it will
helps in decision making process and it is not mandatory to prepare any report. Bentley Motors
Limited selected for the better understanding of this report. It is British manufacturing company
which produce luxury cars & SUVs. It is founded in 1919 in Cricklewood and it is the subsidiary
of Volkswagen Group since 1998.
This report includes the various topics such as management accounting and essential
requirements of management accounting system. Accounting reports and various financial
problems which required to solved with the help of various tools & techniques. In addition, it
includes the accounting reports, advantage & disadvantage of various planning tools for the
budgetary control. Along with this, how management accounting systems help the organization
to solve their financial problems in order to achieve their business goals & objectives.
MAIN BODY
Activity 1
PART A
Management accounting: It is also called managerial accounting, where manager handle
all the operational activities which help the manager to enhance their internal activities.
Managers use the financial information for developing effective strategy and it will further helps
in decision making process. It is based on the previous trends which helps in identifying future
aspects (Azim and Ara, 2015). Management accounting follow by the manager of Bentley
Motors Limited which is beneficial for the organization to identify their actual position of the
business.
Management accounting system: It includes the various methods which requited by the
manager in order to increase their operational efficiency as well as it increase the individual
performance. These systems helps the manager to increase efficiency as well as effectiveness in
the organization. With the help of management accounting, internal as well as external users are
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able to build strategy which further used at the time of taking any decision. There are various
management accounting system which followed by the manager of Bentley Motors Limited in
their organization and it will be discussed below:
Inventory management system: This system helps in tracking inventory level of the
entire supply chain which provide the overall idea regarding further orders. It includes every
things from manufacturing to delivery of products. With the help of this system, manager can
easily track or can see the every movements in the operations. Manager of Bentley Motors
Limited used this system for the better effectiveness or efficiency in the organization because
they have to maintain optimum stock for the production. With the help of this manager identify
the requirement because shortage will affect the production and profitability. Along with this,
excess inventory can cause the wastage of raw material which increase the cost and it
automatically reduce the profit margin.
Cost accounting system: It is also called costing system, which is used by the
organization in order to estimate the each unit cost. With the help of this, manager analyse the
cost benefit for the business, inventory valuation or profitability analysis and control the cost
over the production period. This costing system evaluate the carious cost which are related to the
production such as fixed and variable. In Bentley Motors Limited, manager use this method to
analyse their per unit cost which helps the organization to develop various strategy which
beneficial for the decision making process. Manager identify each activities which represent
valuable or non valuable and after this they reduce the non valuable activities which helps in
reducing cost and try to control it for longer duration (Cheng and others, 2014). It essentially
required by the manager to identify cost and reduce it for the maximisation of profit margin.
There are different types of cost which included in the cost accounting system and it will
mentioned below:
 Fixed cost: It include those expenses which is fixed for the specific time period such as
monthly rent of warehouse. Weather production happen or not but they have to pay fixed
charges. Another example is worker's salary, premium of insurance, maintenance etc.
 Variable cost: It contain those expenditures which changed as per the production unit
increase. It includes the labour as well as material expenses and it's price will changed.
 Overheads cost: In the manufacturing business, various overheads cost are included such
as taxes, insurance etc.
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Price optimisation system: It is an mathematical analysis which helps the manager to
identify customers need & desire. It helps in measuring their buying behaviour which affect the
organization to set different price range which meet with organizational objectives. Under this
method, manager identify the price which maximise the profit margin of the business. Manager
of Bentley Motors Limited use this pricing system to measure customer's reaction toward
different price range. This system helps in providing competitive advantage because it is well
known brand in the market. They set higher price for their cars because they know that, it has
huge demand in the market as well as among the consumers.
Functions of Management accounting:
Management accounting is a process of summarising, analysing and controlling the data
and information in order to maintaining performance of the organization to achieve its
objectives. Management accounting is a tool that is used by the management of the organization
to operate its internal operations and functions. The main functions that a management
accountant has to perform are planning, organizing, monitoring and controlling.
Bentley Motors Limited which is involved in manufacturing of luxury cars, has adapted
the management accounting process within the organization. The management accountant of the
company has responsibility to plan the operational and functional agenda with the available
information for both long term and short term period (Drozd, Drozd and Zaiets, 2014). They are
supposed to suggest an effectively organized structure for activities and workforce in order to
maintain balance in performance.
Managerial accountant co-ordinate all the activities with the help of different techniques.
A monitoring over all the aspects related to the operations is expected from them. Management
accounting is responsible for analysing the activities and outcomes and find out the variances and
the reasons behind the variances. They are supposed to suggest the effective solutions for the
problems that are decreasing the performance of the company in order to achieve its goals.
Benefits of management accounting systems:
Systems Benefits
Inventory management
system
 It helps in minimising the cost or maximise the
production through reducing wastage in the operational
process.
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 Organization can regular track their inventory level which
helps in preventing shortage or wastage situation.
Cost accounting system  Helps in evaluating each unit cost for the further analysis.
 It helps in measuring the exact cause of reducing profit or
loss of the organization.
Price optimisation system  It help the organization to focus on on key areas such as
sales margin, revenue etc.
 It will help the manager to take quick decisions which
further helps in achieving business goals & objectives.
Management accounting reporting:
Management accounting reporting is a process which involve the financial and statistical
data to present the business operation to internal management. So they can take short term
decision. The process of preparing the accounting reports includes business activities and
financing information to the manager. It is controlling in nature to assessing the company's per
formation so they can yield better result in future. Management accounting reporting system are
used by the Bentley in order to control the management activities for taking internal decision of
the company. This analytical report are beneficial to manager as well as growth of the
organisation.
 Inventory management report: It is a report of business organisation that shows the real
time flow of goods to assistance the any point time of sales. This report involves supply
chain management, stock inward or outward, stock re order level and stock report. It
reflects the movement of stock as well as determine the In and Out stock management
from a certain location (Eriabie and Egbide, 2016). There are various method to calculate
the closing balance of inventory like FIFO, LIFO and weighted average method that
helps in valuation of the stock. Bentley Motors Ltd. makes this inventory report on
weekly basis to retrieve the balance of inward stock and valuation of outward inventory.
With the help of this report management can assist the inventory handling process and
real time inward stock management.
4

 Performance Report : This reports is management tool or techniques that used to
transmit the organisational goal, vision to each of the employees who are engaged in the
company so they can work better according to their strength. This report can track the
progress of every individual in order to efficiency, ability of the people. Annual
performance report made of an individual in order to find out what they have contributed
for an organisation in the term of performance as per their abilities. Bentley Motors Ltd is
prepared this report to know the contribution of the employee. This report help to assess
the success of a project which they have completed. This report is also used by the
management of Bentley to rendering bonus and incentives to the workers according to
their performance. Market recognition and current status of the company can also be
assessed with the help of it.
 Process costing: It is used in cost accounting where this method identifying
manufacturing cost. Thus costing used when organization done mass production.
Basically this costing methods used by those organization which produce homogeneous
products. In the Bentley Motors Limited, manager can use this reporting system to keep
track their transaction which is related to the money. These types of organizations,
manufacture in bulk but sell in small units so it will helps in maintaining proper flow of
cash in the organization.
 Activity based costing: Under this method, it includes the various cost from finding to
distribution of products & services. With the help of activity based costing, organization
can improve their financial stability through eliminating non profitable activities
(Hoffmann, 2015). Manager of Bentley Motors Limited use this method to identify their
expenses as well as future revenues.
Evaluate how management accounting systems or reporting integrated with organizational
process:
Importance of Management Accounting: Although management accounting is not
mandatory for organizations as it is prepared to assist the managers and internal users yet it is
very important to be done. It has a lot of significances which make it necessary for organizations.
Big manufacturing companies such like Bentley Motors Limited should involve management
accounting system in their organization because:
 Management accounting helps in determining the aims of the organization.
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 It helps in utilizing the data and informations.
 It helps in maintaining the performance of the employees and controlling the costs.
 It provides accountability to the budgets and plans which have been prepared in order to
achieve the objectives of the organization (Leamer and Stern, 2017).
 It increases the efficiency of the business and provides effective managerial control over
the activities.
PART B
Annex A
Annex B
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7

Activity 2
PART A
Budget: Budget is a summary of estimated expenses as well as income which are based
on plans or objectives for future time period. It is a statement or document which is prepared by
top level management in order to estimate expenses along with revenues for upcoming period on
the basis of business goals. All business enterprises whether small or large prepares budget for
the purpose of allocating monetary resources in to various functional departments. Effective
budgets helps in facing financial or uncertain situations which has chances to happen in future.
Financial managers of Bentley Motors Limited prepares budgets which are based on previous
year data (Mohrweis and Shinham, 2015). A budget encompasses transactions related to planned
sales volume along with revenues, assets, liabilities, resource quantities, costs and expenses, cash
flows and so on. It is used for expressing strategic plans for events or activities in numeric or
measurable terms. These are prepared for mobilising funds in all divisions so that overspending
or overutilisation of funds can be reduced.
Purpose of preparation of budget is to provide an aspect based on operations performed
by business in order to carry out events, plans along with strategies. It renders realistic
estimations on the basis of incomes along with expenses which has chances to take place in
future time period and at the same time can affect performance of company. By using budgets,
strategies are formulated in advance in order to resolve problem of financial crisis. It performs
8

various functions such as forecasting, planning, communication, evaluation, coordination and
many more. Budget provides detailed information based on sales targets, inventory production,
capital expenditures, staffing plans, cash borrowings or investment to organisational managers.
Types of planning tools used for budgetary control: Budgets are also known as
planning tools. These are used by managers of Bentley Motors Limited. Some of the budgets
with advantages and disadvantages are as follows:
Functional budget: Such type of budget is associated with various functions of any
company. The budget which is prepared by using particular division or process of any firm is
termed as functional budget. It is formulated by top level management of selected business in
order to estimate expenses related to cost of production, material, equipments, sales, overheads,
labour, marketing and so on (Mustapha and Hassan, 2018). It is further used for determining
projected sales within specified time period. There are various budgets which comes under
functional budget and all are associated with functions of company. Advantages and
disadvantages of such budget are as follows:
Advantages: Functional budgets helps managers of Bentley Motors Limited to set targets
which are to be achieved in future time period. This type of budget is more realistic as well as
motivating as it is familiar with certain issues from grass root level.
Disadvantages: While providing targets to different managers and if they are not lined
up with predetermine objectives of chosen firm then it can result in conflicts between other
functional units at workplace. This budget is based on forecasting for future and certain internal
as well as external factors related with changes in demand, political system, economic cycle,
supply, raw material availability can affect budgetary plans along with systems at great level.
Zero based budget: It is another type of budget where all expenses are justified as well
as approved for new accounting period. It is prepared by scratching with zero base. It
encompasses re evaluation of all items in cash flow statement along with justifying expenditures
incurred by various departments of any organisation. Calculation of expenses for new accounting
period are based on actual expenses which are to be incurred by considering changes in activities
related to operations. Under such method, all activities are justifies as well as explains estimation
of revenues which are linked with associated costs (Nuraini, Prasetyo and Hanafi, 2016). It is
crucial for executives to justify all activities and at the same time forecast revenues while
formulating this type of budget. At the time of preparing zero based budget, financial managers
9

of selected company reduces unnecessary expenses as well as costs. Advantages along with
disadvantages of zero based budgeting are as described:
Advantages: This type of budget helps in properly allocating resources as it do not
consider historical numbers and is flexible in nature in which various modifications are done as
per the time. It also benefits selected organisation to reduce wasteful along with unnecessary
spendings by justifying each expense in operating activities.
Disadvantages: It is very time consuming as well as uneconomical budgetary tool and
requires highly skilled manpower for its preparation. Various monetary resources are also
required for formulation of this type of budget and all enterprises may not capable to spend high
amounts.
Traditional budgets: This type of budget is based on last year budget which is taken as
base for formulating future budgets (Tradition budgeting, 2019). Preparation of current year
budget is done by making modifications in previous year budget through adjusting expenses such
as market situation, inflation rate and so on. Previous year revenues as well as costs plays
integral role in current year budget. It is a quantitative statement along with complementary tool
which is used by managers of chosen company for action planning (PARK, 2015). It includes
goals based on cash flows, revenues. Liabilities, expenditures, assets and many more for
particular time period. A traditional budget is formulated by adding incremental amounts in
current annual budget. It is performed with the help of top down approach which is a result of
hierarchical mentality which describes that central management prepares such budget as per
departmental strategies and further sub departments makes elaboration as per their needs.
Advantages as well as disadvantages of traditional budget are the following:
Advantages: Implementation of tradition budget at Bentley Motors Limited is easy as it
does not require highly skilled or experiences workforce in its formulation. It provides easy
execution as well as controlling of various financial activities by management authorities. It
further benefits in providing opportunities to top level managers in consolidating projects on
large scale which results in improving organisational performance in competitive market.
Disadvantages: It consumed huge time period of financial managers while preparing
such budget. It is fixed as well as rigid as if once prepared making further modifications is not an
easy task. It is dependent on previous year data so not possible to obtain accurate results by using
past information.
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Financial managers of Bentley Motors Limited prepares all the described planning tools
for forecasting as well as preparing budgets as these helps in estimating future incomes along
with expenses which has chances to take place in future time period (Rosen, 2016). Functional,
zero based and traditional budgets are prepared by managers as to analyse future spendings by
chosen organisation. All these provide guidance and directions to resolve issues which may arise
in upcoming time period and accordingly formulate strategies to overcome from critical
situations.
Annex C
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PART B
A business enterprise faces various kinds of financial problems because of lack of
available financial resources which affects efficiency, profitability, performance as well as
market share of the firm. For overcoming from such issues, it is very necessary to keep record of
financial data top take appropriate decisions as well as solutions to overcome from them.
Bentley Motors Limited is a multinational company and the managers are dealing with various
financial challenges (Shinn and Lunz, 2015). For overcoming from financial challenges
managers have to take effective decisions at right time period. Through proper decision making,
there are chances to resolve challenges and improving performances. Information required for
decision making are as follows:
Data availability: in order to take effective decisions, top level management of chosen
company is required to keep updated data and should check that appropriate as well as up dated
data are available to them. If appropriate information is not available then it is not possible to
formulate strategic decisions.
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One Off: the activity or actions which are performed only once are termed as one off.
Production managers analyses various costs which are paid only once and makes sure that they
are not repeated. It helps in making appropriate decisions related to allocation as well as
mobilisation of resources in different activities.
Opportunity cost: Such aspect is used by managers of selected company in order to
determine costs that are missed while choosing other options. It helps in formulation of various
decisions for future time period in order to reduce chances of making same mistakes.
Probability testing: It involved procedures that are followed by managers of represented
business for the purpose of choosing best alternative from various options. By using this aspect,
executives can analyses that applied options will helps in generating more profits or not.
Relevant costs: This type of costs are considered by managers of Bentley Motors
Limited for the purpose of analysing difference between various alternatives as well as choosing
the best option which benefits the company (Snow, 2016).
Net cash flow: For the purpose of making allotments of monetary resources to other
functional departments of chosen company managers determines net flow of cash in order to
allot sufficient funds to each functional department.
There are various financial problems faced by the Bentley Motors Ltd due to
unavailability of money in the organization which can develop financial crises. All the issues
discussed below:
Capital investment: Due to this problems, it will affect the operational activities because
manager of the company get confused with the cost of cars. Due to this reason, manager not able
to evaluate exact of capital investment.
Pricing: This is the major problem which faced by the Bentley Motors Ltd where
manager have to set their product price as per the market value which meet with customers
objective too (Wen, He and Chen, 2014). Pricing affect the overall business because wrong price
can reduce the demand and reduce the profit margin as well.
Above mention problems will be sort with the help of various techniques which followed
by the manager of Bentley Motors Ltd. All the techniques discussed below:
Key Performance Indicator (KPI): With the help of this techniques, organizations can
measure their performance which helps in achieving business goals & objectives. KPI process
can be used in the various level to complete their task with full of high level efficiency or
13

effectiveness. Basically, this techniques focuses on overall performance of the organization and
different departmental sections such as sales, marketing purchase etc. Manager of Bentley
Motors Ltd, use this approach to measure individual performance which can affect the
productivity as well. Manager implement this technique in the organization to measure the issues
related to the price of products. It helps in selecting right price for the product otherwise it reduce
the demand.
Benchmarking: It is the another techniques which is used by the organization to measure
the performance of products in the market. With the help of benchmarking, manager identify the
internal opportunities for the improvement. Here organizations compare their activities and its
outcomes which help the management to identify the requirement of change for achieving
business goals & objectives. In the Bentley Motors Ltd, manager use this technique to identify
the problem of capital investment with the help of comparing their product cost with other
organizations.
Financial Governance: It is refer to the organization, where manager follow the some
set of rules or regulation for collecting, managing and controlling financial information. It
includes the various guidelines which followed by the manager that how to track their financial
transaction, control data and manage the individual performance (Zéman and Bárczi, 2017). In
the Bentley Motors Ltd, manager follow financial governance to resolve their financial problems
which affect the organization in terms of productivity or profitability. So manager have to ensure
that, they follow the guidelines for the effective work.
There is comparison of two companies which face the financial problems and it will be
resolve with the help of management accounting and it will be discussed below:
Financial Problems Bentley Motors Ltd Jaguar Land Rover Conclusion
Issue related to the
price of product affect
the both organization
because manager not
able to address the
suitable methods
which suits the most
for determining the
Organization use the
price optimisation
system for the analysis
of customer behaviour
regarding different
price range. It is
suitable for the
Bentley Motors Ltd to
Manager of the
company use cost plus
pricing method which
increase the profit
margin of the
company and it will
further helps in
achieving business
Both techniques help
the managers of the
both company and it
will further helps in
resolving financial
problem regarding
price of product.
14

price of product. set the best price
which increase the
demand as well as
productivity.
goals & objectives. It
is the best technique
develop their pricing
strategy.
In the organization,
capital investment is
the another financial
issue which manager
have to face and try to
resolve it with the help
of various
management
accounting systems.
In the Bentley Motors
Ltd, manager use the
cost accounting
method to solve the
capital investment
problem in the
organization. It will
help the manager to
record detail
information regarding
product cost.
With the help of Job
costing method,
manager analyse the
cost of each job. It
will help the manager
to measure the each
cost which further
helps in building
effective strategy for
the future decision
making process.
Both techniques of
management
accounting used by the
organization which is
very beneficial to
resolve their financial
problems which
further can affect the
operational functions.
There are various management accounting system which used by the Bentley Motors Ltd
which help in dealing with financial problems and provide effective solution to increase
productivity or profitability. Above mention problems such as pricing and capital investment,
both are solved with the help of price optimisation and cost accounting methods. Because when
manager reduce the cost of each unit than they can increase their profit margin through selling
huge quantity of their products (Zhang, 2016). Management accounting system and techniques
help in resolving financial problems which further help in achieving business goals & objectives.
Along with this, planning tools also helps the Bentley Motors Ltd to resolve their
financial problems. It includes various budget such as traditional, functional or zero based budget
which can prevent the financial issues in the organization, if the internal staff members use in
appropriate way. Manager can follow any one of the budget which is suitable for the
organization and provide various benefits to adopt in the business. After collecting all the
necessary information, manager develop the budget to prevent the financial issues or run
business smoothly.
15

CONCLUSION
From the above discussion, it has been concluded that management accounting and
various systems are important for the organization. Different types of reporting use by the
manager to evaluate the individual as well as organizational performance. In order to develop
strategies or effective decision making, manager have to perform as per the standard rules and
regulations. In addition, planning tools helps in eliminating financial problems or increase the
efficiency or effectiveness. It will further helps in increasing productivity or profitability which
helps in achieving business goals & objectives.
16

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Tradition budgeting. 2019. [Online]. Available through:
<https://efinancemanagement.com/budgeting/traditional-budgeting>
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